Despite short-term challenges, central business districts are well-positioned to capitalise on their strengths to become resilient, multi-purpose destinations and attract investment.
Opportunities to create more value from central business districts (CBDs) exists amid changing demand for office space, new commuter patterns, and the desire for new experiences.
And the potential for revitalisation lies primarily in its real estate, which must be navigated by governments and private sector partners as CBDs reach an inflection point and new, vibrant mixed-use neighbourhoods, take an increasing share of business, residents, and investment.
Retrofitting, repurposing (converting to alternative uses) and repositioning obsolete buildings in line with evolving end-user preferences, changes in the way people live and work, and a greater focus on sustainability and resilience, are key, according to the JLL report The Future of the Central Business District.
“A longer-than-expected return to pre-pandemic levels of public transport use, and footfall, are pushing CBDs and supporting real estate and infrastructure to go beyond acting primarily as places of work,” says Trent Morrissey, JLL’s account executive for the Whole of Australian Government (WOAG).
“CBDs have an immense capacity for change due to their infrastructure, accessibility and stock of underused real estate – all of which underscore their resilience.”
More reasons to be in the city
Asia Pacific is leading the way in the post-pandemic return-to-office. The return rate is over 70% – higher than many parts of Europe and the U.S. In Sydney, the re-entry rate is reported as 30% down on pre-pandemic levels, while re-entry rates in Perth and Brisbane are higher than Sydney and Melbourne.
Some cities are already adapting to this new reality with government and private sector partnerships that aim to expand the purpose of city centres.
Singapore’s CBD Incentive Scheme provides developers with 25% to 30% increases in developable area on assets at least 20 years old when converted from office to mixed-use. Likewise, Melbourne’s West Side Place district, which includes pedestrian areas lined with retail and green spaces to break up office-dominated “superblocks” of core business districts, has been successful in attracting footfall and investment.
In Australia, an accelerating Build to Rent (BTR) supply pipeline is boosting inner-city resident populations and promoting mixed use city centres. Melbourne has around 63% of planned supply.
“While the office will remain core, CBDs need a balanced mix of uses, with improved amenities and investment in sustainable design.”
Morrissey notes that refurbishing existing buildings is more sustainable than new development, citing analysis from JLL that found a carbon impact of less than 500kg of CO2 per square metre for renovations, compared to new development which can measure up to three times more.
This will be significant in helping cities move toward carbon neutrality, especially given more than 1 billion square metres of office space will need to be retrofitted globally by 2050.
JLL estimates that converting only 10% of a city’s older office buildings could create thousands of new residential units, which could tackle housing affordability challenges.
The role of governments
Reinventing CBDs requires partnerships between the private sector and governments, the report explains. Investors can employ a strategic, long-term mindset toward repositioning and diversifying their portfolios to cater to shifting preferences and reduce exposure to external shocks.
Meanwhile, developers should proactively consider locations based on potential for future growth and proximity to demand, the quality and age of buildings, and ability to meet regulatory requirements regarding energy efficiency and sustainability.
Governments must anticipate demand changes and provide greater flexibility to developers and investors, including through expanding tax credits to offset the cost of conversion and streamlining the planning process to reduce the lead time for delivery of new product.
“For CBDs to genuinely thrive, collaboration and long-term commitment from investors and developers, with government support, is critical,” Morrissey says.
“Traditional core areas need to be reimagined and futureproofed with collaborations underscored by data-based insights for robust strategy.”
